Oil companies: PD places 2.7m tons furnace oil demand

Aftab Ahmed

Islamabad:  The Power Division has placed a huge demand of 2.7 million tons of furnace oil due to higher usage in power plants for the period till October 2021 and wants oil marketing companies (OMCs) in Pakistan and refineries to fill this demand.

The demand for furnace oil has been higher due to its usage in power plants. However, oil marketing companies (OMCs) and refineries in Pakistan have enough stocks of furnace oil to meet the demand the power division. But power plants are not ready to consume it.

Sources said that the power division wants oil companies to provide this furnace oil due to higher usage and build stocks to meet any emergency situation.

At present, oil refineries are facing problems to dispose of the stocks of furnace oil and therefore, they are operating at around 60 percent capacity.

Officials said that the demand for electricity would boost during the recent summer season. Therefore, the power division had directed all power plants to operate operations to produce maximum electricity to overcome electricity shortages.

The demand for electricity in the winter season normally drops and therefore, stocks of furnace oil start building up due to higher usage in the power sector.

Earlier, the Petroleum Division has requested the PM office to issue instructions to Gencos and Independent Power Producers (IPPs) to procure furnace oil from companies.

Oil companies in Pakistan lift furnace oil from the refineries but the power sector is reluctant to carry this fuel. At present, oil refineries are operating at around 60 percent of capacity due to the reluctance of the power sector to lift furnace oil from companies. IPPs are mainly consuming LNG to produce electricity.

The Power Division wants PM to direct IPPs and Gencos to lift furnace oil from companies in Pakistan to enable the operation of refineries and exploration companies. It will enhance the production of refineries.

The petroleum division said that it would help to ensure smooth operations at oil refineries companies by lifting furnace oil in Pakistan. It would also help oil and gas exploration companies to maintain fields and avoid disruption in indigenous oil and associated gas supplies.

The petroleum division has given standing instructions to oil marketing companies (OMCs) to prioritize petroleum refineries products before finalizing the import of petroleum products by the petroleum division.

Accordingly, the petroleum division is vigorously monitoring the furnace oil demand available stocks at power plants, OMCs, and refineries. It allows OMCs to import only deficit volumes to cater to the energy requirement of the country.

Pakistan State Oil (PSO) and oil refineries companies have opposed storing furnace oil at Genco’s tanks.

Regarding storing furnace oil at Genco’s tanks at no cost, oil refineries companies have also shown reluctance and argued that there was no viable option as the refineries are already cash-starved due to negative margins.

However, Pak Arab Refinery Limited (Parco) has shown its willingness for high-efficiency IPPs only subject to a provision of withdrawal of furnace oil from storages by refinery as and when required.

It is also important to mention that Pakistan State Oil (PSO) has opposed proposals on different grounds, being a state-owned oil marketing company.

It said that it would be a breach of contract. PSO authorities conveyed any fuel supplies to Gencos and IPPs who have valid fuel supply agreements (FSA) with PSO can only be made by PSO.

It further said that PSO is in a precarious financial position due to outstanding receivables from the power sector, SNGPL, and other government entities that swelled to around Rs 350 billion. It included late payment interest of Rs 63 billion for which PSO had requested to formulate a recovery plan for early settlement of those outstanding receivables.